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Manhattan median rent falls for the first time in over two years

For the first time in over two years, the median rent in Manhattan has seen a decline. As reported on December 14, 2023, by Robert Frank, the median rent in November experienced a 2% decrease, falling from $4,095 to $4,000. This change, as detailed in a report by Douglas Elliman and Miller Samuel, signifies the first annual drop in median rent prices in 27 months.

The reduction in rent, though marginal, is a notable shift following a period of escalated rents due to high demand and limited availability. Over the summer, the rent in Manhattan soared to unprecedented heights, maintaining stability into the early autumn. However, recent observations indicate a rapid waning in demand.

Manhattan's rental market, the largest in the United States, is a crucial indicator for both the housing market and broader inflation trends. Despite predictions of a rent decrease, the combination of strong demand and a tight supply had previously propelled rents to peak levels.

Keyan Sanai, a leading rental broker with Douglas Elliman in New York, remarked on the suddenness of this decline, noting the tangible shift in the market dynamics. Landlords, in response to the changing environment, are resorting to concessions like offering a month of free rent, instead of reducing list prices. For instance, Sanai managed to negotiate a deal for a midtown one-bedroom apartment, bringing the effective rent down from an asking price of $4,700 to $3,900 a month.

The report also highlights a rise in the number of apartments offering concessions, from 12% in October to 14% in November. Concurrently, the interest in apartment rentals has noticeably cooled. Sanai recalls a significant drop in renter inquiries for luxury units priced at $7,500 a month, a stark contrast to the demand observed just a few months earlier.

Despite this downturn, Manhattan's rents remain the highest in the country, still averaging $5,150 a month and being 11% higher than pre-pandemic levels. The inventory, while slightly increased, is still below the normal 3% level.

Looking forward, brokers anticipate that rental prices may continue to decline into the next year. Factors such as job cuts in the financial and tech sectors in Manhattan, along with falling mortgage rates making home buying more appealing, are expected to dampen demand from young professionals and turn more renters into buyers.

Sanai advises landlords to brace for a challenging winter, with prospects likely improving in the spring. For renters, he suggests seizing the current opportunities and taking advantage of the available deals.

Source: MMCG Analytics, LLC, Robert Frank, CNBC

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